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Baroness Buscombe: My Lords, the House will be grateful for the Minister's announcement of, and explanation of, the orders. I propose to respond taking the Social Security Benefits Up-rating Order 2000 and the Guaranteed Minimum Pensions Increase Order 2000 together.

First, I make it clear that we shall not vote against the orders because we do not want to stop the uprating of benefits. However, we are concerned that the 1.1 per cent rise, which amounts to 75 pence in the basic rate pension, is significantly less than the Minister's department's spending plans published in March 1999 which assumed a 1.3 per cent increase in the basic state pension from April 2000. We calculate that this difference amounts to a £90 million saving from pensioners. We should like to know what has happened to that sum. Is this a clear sign that the Government have decided to ignore once and for all their manifesto commitment to retain the basic state pension as the "foundation of pension provision"?

The Government certainly appear to prefer to announce eye catching gimmicks such as the free television licence for a selected group of pensioners. Indeed, that was the only new benefit pensioners received in the previous so-called "pensioners' Budget" of November 1999. Then there is the universal winter fuel payment, another provision that has no statutory protection and could therefore be dropped at any time. In addition, actual delivery continues to be a

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problem. Over the 1997-98 winter it was almost summer before payments were received. This year we understand that the Government do not know precisely to whom it must be paid following the recent ruling in the European Court of Human Rights which decided that men and women are equally entitled to receive it. We are pleased that payments will be backdated to 1997 for those who are entitled. However, can the Minister say to whom and when this payment will be made?

It is not only the delivery of the winter fuel payment that is causing concern. The breakdown of the national insurance computer system (NIRS2) has caused misery to thousands of pensioners who have not received their proper entitlement. In September 1999, one year after the Secretary of State first stated that the computer problem would be resolved in--I quote from a "Dear Colleague" letter dated 11th September 1998--"the next couple of weeks", only two thirds of cases affected had been identified.

On 17th January 2000 the Minister of State in another place, the right honourable Member for Birmingham, Perry Barr, stated that there are,


    "83,000 cases outstanding and we expect all to be settled this year".--[Official Report, Commons, 17/1/00; col. 569.]

Can the Minister give a clear indication today of when this mess will be cleared up since upratings are of little significance or encouragement to all those still affected by this administrative incompetence.

Returning to the new Labour pre-election manifesto, in addition to championing the basic state pension it also stated,


    "we believe that all pensioners should share fairly in the increasing prosperity of the nation".

How can the Minister reconcile this commitment with a £5 billion a year tax on pension funds and the abolition of the most popular savings vehicles of all time--namely, TESSAs and PEPs--such that now the amount of money that people can put away tax-free each year for their future prosperity, for their retirement, if they so wish, has been halved?

In addition, with the abolition of dividend tax credits, 300,000 pensioners whose income is so low that they do not pay income tax will have to pay, on average, an extra £75 a year in tax.

Further, in the 1999 Budget, having given the impression that pensioners would retain the married couples allowance, the small print revealed that those turning 65 after next April will not be able to claim the allowance and that this will cost them an extra £500 year in tax that they had neither expected nor planned for.

It is also important to note that the Government have now abolished the allowance granted to widows aged 60 to 65 following their husband's death and simply replaced it by a payment which will only be available to widows under pensionable age.

Even the disabled are having a raw deal now that the Government are means testing incapacity benefit for the first time. Individuals who have a modest pension will lose their entitlement to incapacity benefit. This

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will discourage people on low incomes from saving while penalising those who have been able and prudent enough to save for their future. This change also attacks the contributory principle.

It is true that, thanks to our policies when in government for encouraging investment and occupational pensions, more pensioners currently enjoy higher incomes and so are less dependent upon the basic rate pension. However, given the Government's erosion of pensioners' investments and occupational pension schemes, we are deeply concerned that the pendulum is beginning to swing in the other direction since it no longer pays to save and we will see a growing dependency upon the basic state provision--that is the basic rate pension--for the long term. To make matters worse, we on these Benches believe that the Government's stakeholder pension scheme will drive people out of existing occupational schemes and into stakeholding instead.

In contrast, a crucial incentive to pensioners would be to raise the capital limits in order to match them more closely to current interest rates. The limits have not been increased since 1990. I now urge the Minister to respond to promises made in another place during previous uprating debates going back to 1998, and referred to by my honourable friend, the Member for Havant, in another place when these orders for 2000 were debated on 7th February. For example, he said:


    "In February 1998, the then Under-Secretary of State for Social Security, the hon. Member for Manchester, Withington ... said: 'I do not dissent from the view that there are problems with capital and disregards. In our review of benefits and the general review of the welfare state, capital and disregards will have to be considered'".--[Official Report, Commons, 7/2/00; col. 35.]

Moving to the substance of the Guaranteed Minimum Pensions Increase Order 2000, our response to this extension of means tested benefits is that its practical effect is to act as a severe disincentive for saving into retirement for people on low incomes, thereby resulting in increased state dependency among pensioners. Given the minimum pension guarantee and the Government's pledge to raise it in line with earnings, some people who save, for example, in a stakeholder pension, could be better advised not to bother saving at all. Why does the Government seek at every turn to undermine those who are prudent and want to prepare to support themselves with private provision in retirement?

We on these Benches believe in protecting pensioners' savings and increasing their incomes from funded pensions. Our fundamental objection to the Government's strategy is their undermining of pensioners' incomes by their stealth attacks on pension funds, coupled with a patent reluctance to do more than tinker with the system. Where is the genuine commitment to welfare reform that we heard so much about before the last election? These uprating orders to not provide pensioners and those genuinely in need with anything more than disappointment.

Earl Russell: My Lords, the debate puts me in a little difficulty. By long tradition, this occasion has been

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used for a general discussion of the state of the social security system. However, I shall be doing that tomorrow.

Baroness Hollis of Heigham: My Lords, I am sorry. It is not my fault.

Earl Russell: My Lords, it is not the Minister's fault, nor mine either. It is just one of those things. But since I am not the young lady named Bright, I do not intend to arrive on the previous night. I must therefore find a few other things to say.

I thought that I might pay some attention to the general principles upon which uprating should be based. The Minister may remember that we on these Benches abandoned the principle of uprating in line with earnings a good while before her party did. I can remember an occasion in the days "BT"--"Before Tony"--when the noble Lord, Lord Carter, asked me to put my name to an amendment of his to change uprating so that it was in line with earnings. I told him very quietly that I would rather sit that one out. The noble Lord, Lord Carter, looked like a hurt spaniel. So we can see that there are difficulties in affording uprating in line with earnings.

It also seems to us clear that if uprating is in line with prices and not with earnings, then there will be a steadily widening gap opening up between people on benefit and the rest of us. That must mean that, as resources allow, from time to time there must be upratings which go above prices, and occasionally well above prices.

I wonder whether this might be regarded as such an occasion. I have read the report of the Government Actuary with some care. It is a highly encouraging report. There is a generally beneficent economic climate--or, at least, there has been--which is international as well as national. It owes a great deal to the success in overcoming the Far East crisis of 1998. There was a single year surplus of £1.5 billion and a balance in hand of £16 billion.

The Minister may perfectly well say--she probably will--that benign economic conditions do not always last, but what encouraged me most in the Government Actuary's report was its concluding sentence:


    "However, even quite substantial alterations in economic conditions should not cause the balance in the fund to fall below the levels seen in some recent years".

That is the kind of statement that actuaries do not make very often.

It has presented the Minister with an opportunity not only for some uprating a bit above prices but also to review the pattern of the relationship between one benefit and another. Gaps open up in different places at different times, and it would have been worth taking the chance to review the way things have developed since 1988.

I agree entirely with everything that the noble Baroness, Lady Buscombe, said about the need to uprate pensions by more than the proverbial 75 pence.

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On Marie Antoinette principles, pensioners would find it difficult to use that to buy a piece of cake unless it was a rather poor quality cake.

I take the Minister's points about winter fuel and free TV licenses. But will she tell me whether a provision exists anywhere in legislation or regulation whereby the benefits may be uprated in some future year? If it does, I am not aware of it.

The Minister talked about the minimum income guarantee--MIG--which she regards with great enthusiasm. I shall be grateful if she will tell me whether she has discovered any secure means of delivery for the minimum income guarantee. How does she get the money to those who need it? Unless she can answer that point, the value of the minimum income guarantee is perhaps greater in the course of conducting a debate than in the course of feeding a pensioner. If the Minister has an answer to that, I should be pleased to hear it.

The Minister talked about children. I welcome the increases, but I wonder whether the form of her statement that she had lifted 800,000 children above half the average earnings illustrates the danger of taking one single target for poverty, which is a great invitation to benefit those just below the target level--to float them off--while leaving those in much deeper poverty entirely alone. It is a danger of taking one single yardstick to measure a problem. One needs to consider also those in much deeper poverty.

I wonder also whether the Minister might have done well to consider the relationship between single people and couples and that between the young and the old. She may remember signing an interesting Written Answer to me on 19th January, which dealt with the rates of income support as a percentage of average earnings. I concede at once that average earnings are not the same thing as average income and that income support pays out housing benefit. Nevertheless, some of those rates are quite striking. The income support level for single young people aged under 25 is 10.15 per cent of average earnings--not particularly generous. For single people over 25 it is a little better: 12.82 per cent of average earnings. Those rates are hardly princely.

Furthermore, the tendency to hardship is exacerbated by the longstanding principle--at least, since 1988--that special hardship payments are not normally made available to single people. I have never understood at all why being single means that one is incapable of experiencing severe hardship. Hunger is just as painful and the ground is just as cold to sleep on. If the Minister has an answer to the question of why single people cannot obtain hardship payments, I should be glad to know what it is. That is a matter that she might have addressed.

The differential between young people's and old people's rates of income support is a further matter that might have been addressed. It is an effect of percentage increases that if an equal percentage increase is given to two unequal sums, the differential widens. In terms of pounds as distinct from

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percentages, the difference between income support for people under and over the age of 25 has been widening slowly since 1988. In some year or other, something should have been done to prevent that gap from widening much more quickly. This year, with a surplus in hand, might have been a good year to do it.

Finally--I am sure that I should have surprised the Minister a great deal more by not saying this than by saying it--I must, probably for the 20th or 30th time, express my deep regret that she has taken no advantage of the opportunity to uprate the capital limits on savings. Those have not been uprated in most cases since 1988, which means that the principle of a protected level of savings is itself in danger of coming so near to disappearing that it becomes nugatory. Someone with a good enough grasp of political history to remember the first Wilson administration will understand what I mean when I pronounce the words, "dog licences".


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